Japanese alternate venues win right to keep trading

The Japanese regulator is soon to publish new guidelines
which will ensure market participants are able to continue trading, should the
country’s main exchange experience an outage.

Sources close to the matter have told theTRADEnews.com that
the Japan Securities Dealers Association (JSDA) – the agency governing the
country’s proprietary trading systems (PTSs) – will release the new rules as
early as this month.

Last month, market participants were in an uproar when the
JSDA halted trading at PTSs after an IT failure shut down the trading of 241
stocks on the Tokyo Stock Exchange (TSE). The 2 February outage lasted almost
four hours but the technical difficulties would not have affected the ability of
PTSs, such as SBI Japannext and Chi-X Japan to trade. In fact, the country’s
other bourse – the Osaka Securities Exchange (OSE) – continued trading.

Since then, the JSDA has organised a working group to
discuss proposed rule changes. It is understood the working group met for the
third time Wednesday to compile its report to the JSDA and that the watchdog is
now finalising its new guidelines.

One person with knowledge of the group’s activities and requesting
anonymity so they could speak freely about the proposals, said the new policy would
mean the JSDA could no longer halt PTS trading simply because of problems with
the TSE.

The guidelines would only permit the JSDA to shut down PTSs
on specific stocks if the main exchange had halted that stock due to unexpected
or disruptive market shocks which may have a significant effect on market price.
Such halt-triggering revelations would include sudden disclosure of uncertain
material information regarding a listed company – like newspaper articles revealing
mergers, bankruptcies or scandals.

The source said final guidelines were on schedule to be
completed by the end of the month, with a view to implementation in April.

After losing ground in January, the TSE regained market
share last month at the expense of PTSs, accounting for 91.5% of trading in
Japanese stocks, compared to 89.45% in January. Closest rival SBI Japannext
lost 0.7% market share to end February on 2.51% and Chi-X Japan also suffered a
decline in market share to 1.97%, from 2.65% in January.

However, SBI Japannext also reported it broke records for
monthly and daily average turnover in February, with ¥792.5 billion (US$9.7
billion) and ¥37.7 billion (US$462 million) traded respectively.